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Trump Announces Plan for New Steel and Aluminum Tariffs

President Donald Trump's plans to impose heavy, punishing penalties on foreign steel and aluminum raised fears of a global trade war and brought a response from global markets. Trump plans to put a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports. (Published Friday, March 2, 2018)

President Donald Trump's plan to slap taxes on steel and aluminum imports was branded Friday as "absolutely unacceptable" by Prime Minister Justin Trudeau of Canada, the United States' biggest foreign source of both metals.

Trump hasn't sparked a trade war — yet. But his provocative action has raised the risk of an all-out conflict that could pit the United States against its friends and the entire global financial system that it helped create after World War II. When Trump announced Thursday he was imposing a 25 percent tariff on steel and 10 percent tariff on aluminum on national security grounds, he set into motion the possibility that trading partners would fight back with tariffs of their own.

The rebukes delivered on Friday suggested that some countries were prepared to retaliate if necessary.

Markets tumbled in Asia, where China had already expressed a "grave concern" about U.S. trade policy. And the European Union promised retaliation against American exports if Trump follows through. In the United States, the S&P 500 dropped as much as 1.1 percent before paring its decline.

"None of this is reasonable, but reason is a sentiment that's very unevenly distributed in the world," said Jean-Claude Juncker, president of the EU's executive body.

Asked if a trade war is brewing, he said: "I can't see how this isn't part of war-like behavior."

The 28 countries in the EU could respond by taxing goods that are core to the American identity such as Bourbon whiskey, blue jeans and Harley Davidson motorcycles, said Jean-Claude Juncker, president of the European Commission.

China has warned that Trump's vow on tariffs would have a "huge impact" on the global trading order and said Beijing would work with other nations to protect its interests.

"If the final measures of the United States hurt Chinese interests, China will work with other affected countries in taking measures to safeguard its own rights and interests," Wang Hejun, head of the ministry's trade remedy and investigation bureau, said in a statement on the ministry's website.

Chinese leaders have threatened in the past to retaliate if Trump raises trade barriers, but now need to weigh whether to back up those threats with action and risk jeopardizing U.S. market access for smartphones and other exports that matter more to their economy than metals.

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Prime Minister Justin Trudeau of Canada, the United States' biggest foreign source of both metals, branded Trump's plan to slap taxes on steel and aluminum imports as "absolutely unacceptable."

Trudeau stressed in his comments he was prepared to "defend Canadian industry" and that the tariffs would also hurt U.S. consumers and businesses because prices could rise.

Canadian Foreign Minister Chrystia Freeland said Canada is prepared to take responsive measures to defend its trade interests.

Canada is the biggest steel exporter to the U.S., and Freeland noted that Canada buys more American steel than any other country in the world, accounting for 50 percent of U.S. exports. She also noted the steel and aluminum industry in North America is highly integrated and said the Canadian government will continue to make that point directly with the Trump administration.

Hiroshige Seko, Japan's trade and industry minister, said at a news conference, "We don't think imports from Japan, an ally, have any effect at all on U.S. national security."

A South Korean trade envoy, Kim Hyun-chong, met with Trump's chief economic adviser, Gary Cohn, and Commerce Secretary Wilbur Ross to "strongly demand" they keep the impact on South Korean companies to a minimum, according to a trade ministry statement.

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Early Friday, Trump took to Twitter to defend himself: "When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

He later tweeted: "Our steel industry is in bad shape. IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY!"

Sen. Sasse echoed a sentiment of many U.S. lawmakers when he issued a statement in response: "Kooky 18th century protectionism will jack up prices on American families."

Trump's announcement came only after an intense internal White House debate. It brought harsh criticism from some Republicans and roiled financial markets with concerns about economic ramifications.

Trump has long railed against what he deems unfair trade practices by China and others. This week, he summoned steel and aluminum executives to the White House and declared he would levy penalties of 25 percent on imported steel and 10 percent on aluminum imports. The tariffs, he said, would remain for "a long period of time," but it was not immediately clear if certain trading partners would be exempt.

"This is going to have fallout on our downstream suppliers, particularly in the automotive, machinery and aircraft sectors," said Wendy Cutler, a former U.S. trade official who is now vice president of the Asia Society Policy Institute. "What benefits one industry can hurt another. What saves one job can jeopardize another."

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Steel-consuming companies said steel tariffs imposed in 2002 by President George W. Bush ended up wiping out 200,000 U.S. jobs.

The decision had been strenuously debated within the White House, with top officials such as economic adviser Gary Cohn and Defense Secretary Jim Mattis raising concerns.

The penalties were pushed by Commerce Secretary Wilbur Ross and White House trade adviser Peter Navarro, an economist who has favored taking aggressive action.

Mattis, in a memo to Commerce, said U.S. military requirements for steel and aluminum represent about 3 percent of U.S. production and that the department was "concerned about the negative impact on our key allies" of any tariffs. He added that targeted tariffs would be preferable to global quotas or tariffs.

Plans for Trump to make an announcement were thrown into doubt for a time because of the internal divisions. The actual event caught some top White House officials off guard and left aides scrambling for details. Key Senate offices also did not receive advance notice.

White House press secretary Sarah Huckabee Sanders said the decision "shouldn't come as a surprise to anyone," noting that the president had been talking about it "for decades." On Friday, she told reporters that Trump wasn't concerned about the day's market decline, adding that the "president is still focused on long term economic fundamentals."

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Sasse wasn't the only Republican in Congress who was plainly upset.

GOP Sen. Pat Roberts of Kansas, chairman of the Senate Agriculture Committee, said, "Every time you do this, you get a retaliation and agriculture is the No. 1 target." House Speaker Paul Ryan, R-Wis., said through a spokesman he hoped Trump would "consider the unintended consequences of this idea and look at other approaches before moving forward."

Trump met with more than a dozen executives, including representatives from U.S. Steel Corp., Arcelor Mittal, Nucor, JW Aluminum and Century Aluminum. The industry leaders urged Trump to act, saying they had been unfairly hurt by a glut of imports.